Managing Healthcare Real Estate and Facilities is Critical During Uncertainty

Any business — and even with its special nature and frequently non-profit status, healthcare is still a business — has complex considerations beyond what seems to be its obvious concerns. A massive collection of activities is necessary to enable services offered to patients.

In addition to billing, HR, procurement, and logistics are such unglamorous activities as finance and asset management. At a time when the nature of healthcare is in disarray and the future uncertain, the last two become critical. Intelligent control of finances and asset portfolios becomes a hedge against the future and a necessary step in fiscal responsibility.

As is true in many industries, healthcare companies have a real estate aspect. They need physical locations to provide services tied to a geographic community. Even a smaller hospital requires significant real estate. As hospitals grow larger, or combine under single organizations, the holdings can become vast, with even single locations including multiple buildings, physical plants, and parking. And then there is the trend to establish satellite clinics and urgent care facilities to reach a broader market in a more cost effective way.

According to Michael Pappas of BDO Consulting, writing in Facility Executive, a medical center spends $5,000 annually on maintenance, utilities, and other services for each full-time employee equivalent. Given that real estate represents 40 percent of a hospital’s balance sheet assets, real estate, buildings, utilities, and their management are an enormous financial consideration.

Sound management must include real estate and facilities. They are tools the organization can use to achieve its overall goals and must include the following, as Pappas notes:

  • Executives must understand costs, utilization, and productivity to know whether these assets are being used wisely and returning the value they represent.
  • Develop an operational model to improve services, reduce costs, and improve resource usage.
  • Regularly review contracts and audit performance of providers.
  • Undertake future real estate decisions to preserve flexibility and support strategic goals.
  • Apply the right forms of analysis to understand capital projects and their impacts on cash flow, revenues, and balance sheets.
  • Design spaces to more effectively enable treatment and movement through the facilities.
  • Incorporate plans for remote work to lighten the demand burden on physical facilities.
  • Include IT infrastructure in planning and management, with a governance framework that considers privacy, data quality, security, integration, and cyber defenses.

Important in its own right, the need to manage facilities and real estate also shows how expansively managers need to think and plan in the modern healthcare setting.

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